Build the perception that your store provides exceptional value.
Editor’s Note: In the February/March and April/May issues of FURNITURE WORLD (posted to the Marketing Management Index on furninfo.com), David Middlebrook looked at ways store management can build good customer relationships. This article completes his series by further examining how the best retailers develop relationships with their customers that turn into bottom-line profits.
The appearance of your store, the layout of the display floor and product displays are key determinants of how customers perceive the quality of your business.
Good customer relationships translate into customer referrals, cost savings, revenue growth, and price premiums. Let’s look at each of these and examine how they increase your bottom-line profitability.
Repeat sales
Repeat sales generate additional revenue and more gross margin without the need to increase advertising expenditures. Repeat customers are easier to sell. They are already familiar with your store, know what kinds of products you carry and feel comfortable shopping there (or at least more comfortable then at your competitor’s store).
Customers tend not to argue about price when they trust and respect the sales person’s advice. Another way of saying this is that once the value of the product has been established, there is less need for consumers to negotiate. This respect can be earned by establishing a trust-based relationship that leaves the prospect believing that they are important.
In part II of this series (posted to the sales management index on www.furninfo.com) we suggested trying the 1-5-15-30 plan for customer contact. Courtesy in the store-- Thank You note--Phone check up after the note--small gift--recheck by phone. That intimacy creates value and value creates profit.
Your loyal customers can and often do pay a price premium for relationship service, which they consider a better value than lower priced goods sold in a less comfortable setting. The effort the customer saves is worth more to them than the price premium paid. Their purchase also feels less risky since they are confident that you will stand behind your products.
Referrals
Like repeat sales, referrals are an inexpensive way increase profitability.
Word of mouth advertising is your most convincing reference. When an important customer is satisfied enough to recommend your store, this customer’s credibility is added to yours. It is a free and powerful tool (see Cathy Finney’s 2-part series in the February/March and April May issues of FURNITURE WORLD posted to furninfo.com in the "Sales Skill" index).
Recognition
Recognition of your ability to identify key customer trends and their relationships to your product, service and advertising line up means less inventory investment for the same amount of sales. Using a database not only to keep track of buyers and non-buyers, but to track interests and objections, lets you layout and stock your floor much more efficiently. The data collected and analyzed by your CRMS will allow you to hold targeted private sales for customers you have already identified as having an interest.
Your ability to target the niche you have recognized also increases sales and margins without increasing expenses. Once your target is clearly established, the right media investments become obvious and your advertising dollars are spent in the most cost-effective manner. You want to find the right customers. Some of the customers in your database will be more predictable and prefer stable, long-term relationships. Other relationships will be more profitable for you; requiring less service and selling time. There will also be those that are better "fits" because they match your store’s target customer profile.
The volume of detailed data necessary to provide successful results can only be analyzed by an automated system. Remember this is not a one-time project. It is an ongoing business strategy proven to produce guaranteed results. A 3x5-card system is fine for an isolated reference of data, but it cannot be regularly analyzed for trends. Even if one wanted to argue that they could keep up with that volume of analysis, the cost would be prohibitive. An automated system can analyze a week, month, quarter or year in five minutes and be able to produce 100 letters in the next hour.
Database information about customer needs and desires can only be gathered if you take the time to establish relationships. To achieve maximum results once acquired, this information must be used systematically. This systematic use of information will have multiple positive effects. It will help you to attract more professional salespeople because of their ability to earn higher commissions. It increases your bottom line and adds to the perception of value your store provides to its customers.
Advertising & Promotion
Advertising and promotion are about finding the "right" customers. If you have good customer relationships you know where they are in their customer-buying life cycle. You know their demographic characteristics, their buying and shopping histories, and you know their preferences and objections. This knowledge translates directly to the bottom line in obvious ways. The stage of the life cycle and the demographic characteristics let you know what to stock and when to call your customer. For example, with an automated system you can click a button and see a complete history of every visit they have made to your store; who they spoke with, what they were looking for and which advertising was most effective in reaching them. You can also track how many times a product you are thinking of carrying but are not, has been asked for by prospective customers.
An automated system can also provide information on the advertising vehicles that efficiently bring people into your store. This in turn allows you to invest your ad dollars more efficiently. Information on personal preferences and objections let you tailor your promotions and sales strategies directly to the prospect. Tracking interests for all prospects allows you to advertise effectively, know what to stock, and helps you develop a more effective mailing list. When you can associate a specific name with specific desires you can effectively begin a relationship. This is a significantly better approach than mailing to a whole zip code.
A tracking system also allows you to analyze your advertising and sales staff effectiveness. See which salespeople are weak in an area and which Rep they need to spend training time with. Know when to change a losing strategy. Report in real time, with real data. Don’t just roll the dice. Use the facts when making important decisions. If you have accurate data you will reap many benefits.
Flexibility
When you have a good relationship with a customer, you will be able to count on more flexibility around factory delivery dates and home installation dates. You may be able to see that customer in off peak times to reduce the load on the sales staff.
Service
Good customers require less service. As "relational salespersons", you can find out what your customer needs to know before an item is delivered and concentrate on emphasizing that important information. You can inquire about the types of items that are likely to last in their home environment to prevent mismatches that require returns, repairs or service calls that erode customer confidence and eat away at profits.
Cost
As customers get to know a business they become more efficient. Likewise, when businesses know customers they also tend to be more efficient. "Relational customers" don’t ask for things you don’t carry or services that you don’t provide, however, they are loyal enough to ask if you will special order and then are willing to wait. Sales staff does not waste time presenting items or brand lines that they should know their customers do not desire. A good tracking system will permit salespeople to look at a complete history of notes entered every time a customer has visited the store, they will know their customer’s special requirements such as convenient delivery times, difficulty in installations and fabric requirements. The good relationship customer will have low or no collection costs or bad debt.
The mechanic who always works on your car is much faster and better at recognizing the problems than a mechanic or series of mechanics who see your car one time for a particular problem. The same holds true for the relational salesperson.
There are many other ways that building good customer relationships translate into operational savings. These examples just scratch the surface.
Value
You need a strong value proposition. Why does your store provide value that other stores or sources of competing goods do not? It’s really just an updated version of the golden rule. It’s a cliche but true. Maybe you need to reinforce an old rule: Treat others the way you want to be treated yourself. Too many people have become used to providing poor service and quality. You need to raise the understanding of what good, considerate service and quality product are for your own associates and customers. This provides the basis for the company’s marketing strategy.
Customers
You need to identify the right customers. We have seen that the right customers stay with us longer, buy more per sale, and refer their friends. You need to know as much as you possibly can know about every prospect and customer’s needs. Being able to look at a complete history of interests and not just what has been sold will help staff know what products to present for future purchases. We have talked about the items we would like to know about in each of our key customer groups. This information and our superior value proposition build customer loyalty and long term profits.
Employees
The right employees share the company’s values and have the talent and skill to achieve challenging levels of productivity. They are people of character. The loyalty of these employees must be earned. They must receive training, development opportunities, and the company must have ways to take advantage of these opportunities. As employees stay, they get better at their jobs, the company benefits from that productivity, and from the relationships that employee has maintained with customers. Incentive programs must recognize both initial sales success and longer-term sales retention.
Operations
You need to use the productivity gains from better customer relationships to improve those relationships even further. Employees can be better compensated, customers can have lower prices, more convenience, AND the store can have better returns from these productivity gains. You need to be on target all the time! A Customer Relationship Management System will keep you on target all of the time. It will allow you to run easy-to-read reports anytime that verify that you are on target, and it will help you to see what, if any, adjustments you need to make to stay there.Information is the key to success in all of these areas.
Many stores believe that they do all these things, so why don’t they succeed like the top performers? Because they do not follow these practices consistently. They do NOT have a comprehensive system to analyze the data that’s collected. The only way to be consistent is to automate the customer loyalty function. Collect information on non-buyers and buyers and use that information to support sales efforts, to identify life cycle purchases, and to identify the preferences of the most loyal and profitable customers. Use the information to see which employees need training in which areas, what media buys and sources give the best returns for each customer and product category. Automated software is the only way to do this consistently and thoroughly. After all, SYSTEMS define outcomes.
Throughout this three part series we have defined customer relationships as: All interactions with your business, even the ones you don’t know are taking place. We have demonstrated why better relationships are more profitable and we have described many ways in which these relationships can be built. Finally, we have determined that information is the key to success in all of these areas. To gain the valuable information that you need to make your store the number one choice for furniture, you must establish high quality, long lasting and mutually beneficial relationships.
Start toward that goal today. Remember, if you can’t measure it you can’t improve it.
David Middlebrook of AAAA Development LLC, developers of UpFront™ software, customer relationship management software designed specifically for furniture retailers, speaks and writes extensively on customer relationship management and related topics. For more information about the topics in this article contact FURNITURE WORLD Magazine at editor@furninfo.com.